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The student loan crisis will dwarf the housing market crash.

65 点作者 mikekarnj将近 15 年前

14 条评论

patio11将近 15 年前
It isn't going to be as bad as the housing market crash, because degrees are revenue producing assets for the overwhelming majority of people and houses are costs for the overwhelming majority of people. Also, student loans do not have any mechanisms in them which are designed to induce payment shock, like ARM resets are. (I am only half sardonic there.)<p>If your loan repayments are $700 a month when you graduate, they will be $700 a month for the next ten years. There is no mechanism by which they'll suddenly jump to $3,000.<p>Even for degrees which you wouldn't expect great things from -- like, say, English -- the value of the degree exceeds the price by huge amounts. The NPV of a bachelor's degree in English is about a million bucks. You still come out ahead with virtually any college/loan combination possible, as long as you find a job with it, and unemployment among college graduates is still at ~4.5%.<p>There are a few degrees which are exceptionally bad decisions, but they are the exceptions rather than the rule. One example is culinary school, particularly the ones which will load you with the federal max of loans so that you can get a $12 an hour job as a line cook. There is one glaring sore thumb in the data for master's degrees, too.<p>If folks are interested, I'll blog about this in a few weeks. I did a project for a client looking at government data and a few other sources to try to get numbers on the worth of degrees by majors. The work is 99% over but, clients being clients, there are some more steps it has to go through before they want to launch it publicly.
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krschultz将近 15 年前
"3. College Loan Repayment Reform: If anyone files for bankruptcy, the student loan should go along with it."<p>No, no, no, no. This penalizes the people who pay back their loans far too much. Who wouldn't just go into bankruptcy if they couldn't pay back the loan? Unlike other loans, the bank can't take your degree back. Interest rates will go up for everyone as it becomes a riskier loan. Suddenly people who had fully intended to pay the loan back will be crushed under higher interest rates.
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CWuestefeld将近 15 年前
I got as far as<p><i>The pursuit of profit is a common theme in all of the documentaries I have listed, which is what ultimately led to the predicament we are in today.</i><p>That tells me that the author doesn't have the slightest understanding of economics. That being the case, there's no sense reading about his economic predictions.<p>UPDATE: I think I overstated that. What I really should say is...<p>The author appears to be of the class that believes that if something is done profitably, it must necessarily be bad. While it's true that many evil things are driven by greed, it's equally true that a pursuit of profits leads one to provide the goods and services that society values the most. Since the opening of the article seems to ignore the latter aspect, I don't expect that any economic analysis it might engage in will have any depth.
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kreek将近 15 年前
There's a huge difference between the housing crash and a potential student loan 'crash'.<p>A house is an asset. A unique asset at that, the only kind you can live in (other than your car). An underwater house, despite the term, becomes illiquid. You literally can not sell it. If you become unemployed you can not move to find work without walking away and trashing your credit.<p>A drop in house prices affects everyone. The student loan crisis affects very few and even fewer who make a meaningful contribution to the economy.<p>An underreported aspect of the housing crash was the end of the house as a magic ATM machine. People were spending vast amounts of HELOC money during the boom. Literally doubling their mortgages by pulling out cash against their house. With the crash that has stopped and the economy has ground to a halt.<p>What market would a student loan crash take down? Are people flipping degrees somewhere? If people feel a degree isn't worth it they'll go to a state school or transfer in from a community college. At worst schools will be forced to drop tuitions.<p>The post mentions student loan debts in the billions, subprime losses alone are in the trillions. That's the money out in the open. There's even more money off the books as banks don't have to report a loss until they sell REO property. There's a shadow inventory of foreclosed homes right now that matches the houses you'll find on the MLS.<p>The student loan crisis will in no way shape or form "dwarf" the housing market crash.
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Lendal将近 15 年前
This crisis won't be the same at all, because you can't discharge student loan debt. There is currently no reason for a lender to bother examining the loan because repayment is virtually guaranteed. Having the federal government take over the loans will only make the problem worse. Educational institutions are able to raise their prices precisely because they know that with a combination of federal and state grants and loans, anyone can go to college so why not inflate the prices sky-high?<p>That's what happens when you mix unlimited government subsidies into what used to be a free-market system.
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frossie将近 15 年前
Interesting article.<p><i>2-year Universities: Who made up the rule that we have to attend college for 4 years?</i><p>Tertiary education does take a hell of a long time in the US. In my field, and in my generation, most UK students got their PhDs around 24-25 years of age; for the US students it was more like 27-28. Yes, if that is a real effect that would definitely be a problem.<p>I can think of two factors that may be affecting this (I have no data):<p>1. The level of the student arriving at college. Yes you can probably get a professional degree in 2 years with no holiday breaks, provided your college doesn't have to teach you basics.<p>2. The fact that US colleges cost so much money potentially create a vicious cycle - you need a job to pay for college, which means you need enough spare hours in which to work, which means you have to space out your courses, which means you need more money etc etc.<p>I would be certainly interested in views from US graduates as to why they feel it takes so long.
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ezl将近 15 年前
Seems false.<p>1. Housing market debt dwarfs higher education debt in notional value. &#62;14 Trillion vs 830B.<p>2. Most mortgages are non-recourse, meaning you can walk away. Most education loans are not. So people can't just leave banks on the hook without much more severe penalties.<p>When a homeowner walks away from a 600k mortgage on a house only worth 500k in the market, he/she is implicitly trading credit for 100k in cash. For some people that trade becomes much bigger 900k loan on a now 500k house. A lot of people will trade credit for 400k.<p>If walking away from an education loan was easy(which it isn't), I'm selling my credit for the value of my loan outstanding. That number tends to be a lot smaller, and most college-grads don't find it worth losing your credit for it.<p>* edit for readability
jacquesm将近 15 年前
Student loans are a rip-off. The market is set up in such a way that to get jobs you have to have a degree, and to get a degree you have to borrow a bunch of money so that you can pay your way through school if your parents aren't wealthy enough.<p>The end result is that you'll be beholden to a bank for a good sized portion of your life (as if having a mortgage or rent isn't enough to hold you down).<p>Smart societies have free education, and their schools may not be always as good as those that you pay for with half of your life or so but they're adequate enough.<p>The main reason why education should be free is because education not being free creates an inequality between people born rich and people born poor, the poor will end up getting their education but pay for that with a significant portion of their time later on, the rich don't care.
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ja27将近 15 年前
I don't want to discharge my student loans. I just want to be able to refinance them again based on current market rates.
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c1sc0将近 15 年前
Whatever happened to studying for the sake of it? You know, like learning new things &#38; stuff. When did that shift from studying as exercise for the spirit to studying as a way of fattening your wallet come about?
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nkassis将近 15 年前
One thing no one talks about, why do all degrees virtually cost the same in most universities. Why would a engineer pay the same as a liberal arts student. The reason I saying this is maybe the cost should be proportional to the expected earnings?
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nolite将近 15 年前
looking forward to my bailout
joe_the_user将近 15 年前
The frustrating thing about the article is that it never asks <i>why</i> the cost of four year education has been up faster than inflation for many, many years.<p>His answer to the problem is less education. That seems like a problem to me.<p>The reason we had affordable state school was that education was a good for society as a whole. America, as a whole benefits from having well-educated people.<p>The state schools we had were affordable for both the student and the states. Why is that no longer the case? The article misses this question <i>entirely</i>.
startuprules将近 15 年前
Actually, the commercial real estate market crash will dwarf both the student loan and the housing market crash.<p>"Over the next five years, about $1.4 trillion in commercial real estate loans will reach the end of their terms and require new financing"<p>Elizabeth Warren Warns About Commercial Real Estate Crisis, 'Downward Spiral' For Small Businesses, Local Banks <a href="http://www.huffingtonpost.com/2010/02/11/commercial-real-estate-wa_n_458092.html" rel="nofollow">http://www.huffingtonpost.com/2010/02/11/commercial-real-est...</a>